Bitmain, the Chinese company with some of the largest cryptocurrency mining operations in the world, appears to be having serious trouble as recent departure rumors and a drop in demand for mining rigs cast a shadow on its initial public offering (IPO). The latest blow is the departure of Yang Zuo Xing, an engineer instrumental in Bitmain’s innovations in 2015 and 2016. In what may be just the tip of the troubles iceberg, Yang has started his own ASIC manufacturing company in a move now giving his former employer a headache.
It all started with a tweet by Blockstream CSO Samson Mow, who alleged that three of Bitmain’s teams had absconded, and at least one person was trying to establish a competitor.
When Cryptovest approached Mow for clarification, he said, “I can only pretty much tell you what I posted, not names.”
“I am checking internally to learn […] whether this is even correct information considering Samson’s recent tweets that spread fake news about Bitmain ever since news of Bitmain’s IPO surfaced,” he wrote to Cryptovest.
News from China emerges
Shortly after this debacle, Chinese business and finance magazine Caijing confirmed that at least one person had left the company, and that was Yang Zuo Xing.
This departure is likely to negatively impact Bitmain’s ability to develop new ASICs as Yang is the engineer behind the S7 and S9 mining chips. His defection is a possible explanation as to why the latest releases of SHA256 miners are variants of the S9, including one that incorporates water cooling for better performance.
Yang believes his work helped lift Bitmain as a contender during the bear markets of 2015-2016.
“In the bear market in early 2014, many people left the industry, but I was a bit unwilling. I think my full-customization methodology was especially suitable for Bitcoin chips. I went to [Bitmain] and told them about the full custom design methodology. After my introduction to the company, they hoped that I would stay and join them, and finally use the full-custom design method to help them design the S7 mining machine and the S9 mining machine,” he said.
Reports also reveal the company suffered significantly in the second quarter, posting losses of around $600 million to $700 million. On top of that, purported Bitmain investors including DST Global, Softbank, and Tencent have denied ever putting a dime into the company.
To make matters worse for Bitmain, Yang is now chairman of a company called Shenzhen Bit Microelectronics Technology. It produces the “Shenma” ASIC miner, which is known outside of China as the WhatsMiner.
The newest WhatsMiner M10V1 touts an advertised hashrate of 33 TH/s at 2150W power consumption (65W/Th) and uses brand new chips with a 16nm transistor size. Bitmain’s water-cooled S9 Hydro, which has a total hashrate of 18 TH/s at 1728W, is way more inefficient at 96 W/Th.
So far, Bitmain has failed in its attempts to produce new chips like the 16nm BM1X89, the 12nm BM1X90, and even the 10nm BM1X93. Caijing also reports that the company’s latest research into 7nm technology may suffer the same fate as other manufacturers are already taking the lead and pushing products of their own.
A dethroning in the works?
In light of all this information, the question of whether Bitmain can hold onto its mining crown becomes quite pertinent. But while things may not be looking very bright for the mining equipment giant, it still has a strong grip on the market.
Its IPO may suffer because of recent events, but the real problem is the sheer amount of competition the company is facing. It could explain why Bitmain projected a loss on its future sales revenue.
The losses also have a lot to do with the company’s plans to reduce the price of its rigs, probably hoping to outclass its competition and ease some of the pressure on innovation. This could also backfire as Bitmain’s competitors may still have strong sales due to increased efficiency.
Bitmain’s fate is not set in stone yet. The company still has over a billion dollars in inventory and could use several strategies to pull back ahead of other ASIC distributors.
Further attempts by Cryptovest to obtain comments from Bitmain on these developments have produced no result so far. We will update the story if Bitmain responds.